On Feb 23, 2010, Bloomberg reported that MetLife Inc. (MET) is looking for a $5 billion loan in order to complete the long pending acquisition of American International Group Inc.’s (AIG) American Life Insurance Co. (ALICO) unit. For this, MetLife has already solicited some firms, namely, Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Deutsche Bank AG (DB), Credit Suisse Group AG (CS) and HSBC Holdings Plc (HBC) to tender pledges for a bridge term loan of $5 billion. A final decision is expected very soon.
 
MetLife had been involved in an advanced round of negotiations with AIG since Jan 2010 to purchase its ALICO unit for about $14–$15 billion. For this, MetLife expects to fund the acquisition by paying about $8-$9 million in cash, while the rest will be in the form of debt. This debt would be sought by the $5 billion bridge loan that the company is negotiating from other banks.

Although the negotiations towards the final completion had been delayed for the past couple of weeks due to a tax liability dispute about sale of products to foreign customers, we believe an agreement on the loan will hasten the process of final closure of the ALICO deal.
 
The acquisition of ALICO appears crucial as it will help MetLife expand its global market reach as ALICO sells life insurance in more than 50 countries. With a 13% market share in the US, MetLife’s alignment with ALICO is expected to be immediately accretive to the growth of the company. We believe MetLife’s union with ALICO will not only enhance the company’s global growth opportunities but also help AIG progress steadily with its divestiture program to repay the government money.
 
The short-term outlook is further enhanced by MetLife’s expectation of operating earnings growth by about 50% in 2010. The company estimates it to be in the range of $3.3 billion to $3.6 billion or $4.00 to $4.40 per share. Further, revenue growth is projected to be about 8% in 2010. However, the burden of additional debt triggers caution on the financial risk of MetLife, for the upcoming quarters. Overall, we believe that MetLife is poised to propel its growth once the economy rebounds in the near to medium term.

Read the full analyst report on “MET”
Read the full analyst report on “AIG”
Read the full analyst report on “BAC”
Read the full analyst report on “JPM”
Read the full analyst report on “DB”
Read the full analyst report on “CS”
Read the full analyst report on “HBC”
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